FERC’s new rule on compensation for demand resources tips the market balance toward negawatts. Arguably the commission’s economic analysis is flawed, and the rule represents a covert policy...
Yes, We Have No Negawatts
When you sell demand response back to the grid, how much capacity are you now not buying?
commission would reprise its landmark ruling on energy DR, consider that in calling the technical conference, the FERC staff asked the parties to comment on the following question:
In other words, FERC might give full capacity credit for demand response by a peak-shaving customer, even if, as Bowring put it, the costs of those shaved megawatts “have already been saved.”
Meanwhile, Sipe and EnerNOC propose a dynamic view of capacity DR, not circumscribed by the customer’s prior consumption history, but limited only by present capability.
Citing definitions from FERC, DOE and even NAESB for support, Sipe and EnerNOC assert that capacity is simply the ability to deliver energy upon demand, and so demand response as a capacity resource must be defined in the same dynamic manner:
“The essence of demand response as a [capacity] resource is the ability to move in response to a dispatch instruction.” (See, Protest of EnerNOC, p.17, FERC Docket ER11-3322, filed April 28, 2011.)
It’s the “ability of demand response to affect supply and demand at the margin and is not a function of having purchased a particular amount of entire energy or capacity in advance.”
That means if an industrial customer engages in peak shaving in year one, causing its PLC to fall far below its typical power consumption, then the customer should remain free in year two to earn full DR capacity credit on a promise to back off its entire (and higher) year-two demand, even though that would imply a capacity credit above what the customer might then be paying for capacity in its retail rate.
The customer earns capacity credit on any promised curtailment that it can physically achieve, regardless of how much power it might have used during a peak hour in the prior year.
To further support this dynamic view, Sipe notes that “PJM operators are fully aware” of the discrepancy between a prior commitment and current capability:
“EnerNOC regularly experiences PJM staff calling in advance of anticipated emergency events… The typical exchange requests information regarding how much response PJM is ‘really’ going to get…
“This regularly occurring vignette,” Sipe continues, “illustrates precisely the problem with PJM relying upon static measures of performance: PJM operators cannot dispatch ‘PLC’ during an emergency, and PLC performance measures do not give system operators a means to ascertain resource availability during an emergency.” (See, Post-Technical Conference Comments of EnerNOC, pp.7-8, FERC Docket ER11-3322, filed Aug. 15, 2011.)
In this way Sipe slays the traditional duopoly of capacity and energy:
“There is no way to separate capacity and energy,” he explains.
“As with electrons flowing now or later, ‘capacity service’ and ‘energy service’ differ only in their timing.”
Ski Resorts and Water Parks
Some, including Pieniazek at ECS, and Hess, have suggested solving the problem by calculating PLC on a portfolio-wide basis, eliminating any notion of individual over- or under-performers, but that might take much of the fun out of the aggregation business. Others, such as EPSA’s vice president for regulatory affairs, Nancy Bagot, offered that overperforming customers who wouldn’t qualify for capacity credit under the PLC